starbucks Quarterly results released Tuesday showed sales fell again as the coffee chain tries to rebuild.
“Our fourth quarter results make it clear that we need to fundamentally change our strategy to get back on track for growth, and that’s exactly what we need to do to get back on track,” CEO Brian Nicol said in a statement. This is what we are doing with our ‘Back to Starbucks’ plan.”
Nicol said he plans to share more details about the steps Starbucks is taking to turn around its business during Starbucks’ earnings call, scheduled for Oct. 30. The coffee chain’s new CEO is aiming to reverse slumping demand for Starbucks’ biggest drink. Market: USA
The CEO has already said the company is “fundamentally changing” its marketing by refocusing on all customers, not just loyalty program members. He added that Starbucks plans to simplify its “overly complex menu,” fix prices, and ensure all drinks are handed directly to customers. All three of these goals have been the top complaints from customers and baristas in recent years.
“We believe our problems are eminently solvable and that we have great strengths to build upon,” Nicol said in prepared comments published on the company’s website on Tuesday.
The company’s preliminary net sales decreased 3% to $9.1 billion. Preliminary adjusted earnings per share were reported at 80 cents.
Analysts surveyed by LSEG had expected the company to report fourth-quarter earnings per share of $1.03 on revenue of $9.38 billion.
Following the announcement, the company’s shares fell more than 3% in after-hours trading.
Poor sales
Starbucks’ same-store sales declined for the third consecutive quarter. The 7% drop in same-store sales this quarter was the company’s biggest decline since the coronavirus pandemic.
The company blamed poor sales on weak demand in North America. In the domestic market, same-store sales decreased by 6%. Despite increased investment in the business, including increased frequency of promotions on the mobile app and expanded product offering, traffic fell by 10%.
Same-store sales plummeted 14% in China, the company’s second-largest market. The company blamed the decline on domestic competition, which it said was changing consumer behavior and changing its strategy for the market.
The company also suspended its fiscal 2025 outlook, citing the recent CEO change and the “current state of the business.”
Despite the disastrous quarter, the company increased its dividend from 57 cents a share to 61 cents a share.
“We want to build confidence in our business and provide some certainty as we move forward with our turnaround,” Chief Financial Officer Rachel Ruggeri said in a statement.
Ruggeri added that the company is developing a turnaround plan, but that developing a strategy will take time.
Challenge to Nicole
The company’s surprise announcement of preliminary results comes nearly two months after Nicol took the helm of the coffee giant. The CEO change comes after two quarters of declining Starbucks sales and several activist investors taking stakes in the company.
In the U.S., the chain is losing occasional customers who choose to save money instead of spending it on macchiatos and Refreshers. Starbucks’ business in China has also struggled to recover since the pandemic, with sales declining in recent months due to the rise of cheaper local rivals such as Luckin Coffee and more cautious consumers.
Nicole joined Starbucks after serving as CEO for six years. chipotle pepper. During his tenure at the fast-casual chain, he helped turn the company around after the food-borne illness crisis, invested in its digital business, and built the company into one of the industry’s top performers even during the pandemic.
To stem Starbucks’ slumping sales, Nicol plans to focus first on the company’s sluggish U.S. business. In an open letter released during his first week on the job, he said he would focus on four areas of improvement: the barista experience, morning service, cafe and company branding.
Mr. Nicol has also made changes in the company’s leadership. The company announced Friday that former Chipotle executive Treci Lieberman will join Starbucks in the newly created position of global chief brand officer. Last month, Starbucks announced that North American CEO Michael Conway would be stepping down after just five months in the job. Nicol’s predecessor, Laxman Narasimhan, had appointed Conway before he was fired in August.
As of Tuesday’s close, Starbucks stock is up 1% since the beginning of the year. The company’s market capitalization is over $109 billion.
